Breaking: US GDP contracts 4.8% in first quarter

Eren Sengezer FXStreet

The United States' Real Gross Domestic Product (GDP) contracted at an annual rate of 4.8% in the first quarter, the US Bureau of Economic Analysis' first estimate showed on Wednesday. This reading came in worse than the market expectation for a decline of 4%.

"The decline in first quarter GDP was, in part, due to the response to the spread of COVID-19, as governments issued "stay-at-home" orders in March," the BEA explained in its press release. "This led to rapid changes in demand, as businesses and schools switched to remote work or canceled operations, and consumers canceled, restricted, or redirected their spending."

The BEA further explained that the full economic effects of the COVID-19 pandemic cannot be quantified in the GDP estimate for the first quarter of 2020 because the impacts are generally embedded in source data and cannot be separately identified.

Market reaction

The US Dollar Index edged slightly lower after the data and was last seen down 0.2% on the day at 99.75. Meanwhile, US stock indexes futures pushed higher. The S&P 500 futures were last up 1.3% on the day.

GDP Quick Analysis: Early crash means more Fed stimulus, stocks positive, dollar negative.

The hard data is out – and it is heartbreaking, especially as it is only the beginning. The US economy squeezed by 4.8% annualized. Officials admit the data is incomplete, it was released later than expected, and one data provider erroneously published a positive figure.

US First Quarter GDP Quick Analysis: Can a recession be avoided?

Normality disappeared quickly in the US as activity contracted for the first time five years under the mandatory closure of much of the economy in the Coronavirus fight.

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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